POWERGRID BUDGET & BUDGETARY CONTROL

1. POWERGRID BUDGET & BUDGETARY CONTROL

2. CORPORATE MISSION Establishment and operation of Regional & National Power Grids to facilitate transfer of power within and across the regions with Reliability, Security and Economy, on sound commercial principles

3. POWERGRID -the Central Transmission Utility • POWERGRID started its commercial operation in 92-93 • First ISO: 9001 Company in Power Sector • Operates and maintains 68,719 Ckms of EHV transmission system along with 115 S/Stn at system availability above 99.54 % • Over 45% of the total generated power is wheeled by POWERGRID • Rated Excellent under MOU with MoP since 1993-94 • Continuously Profit making PSU since inception. • Received AAA rating from domestic credit rating agency • Nodal agency for Disaster Management in Indian Power Sector

4. POWERGRID – The Central Transmission Utility Such a performance is through: • Robust system design after detailed studies, and thrust on integrated development • In-house expertise in all specialised areas of power transmission with systems up to 800 KV UHV AC,  500 KV HVDC, Gas Insulated Sub-stations, Static Var Compensation, Series Capacitors, Controlled Shunt Reactors, etc. • Strict Quality Control during design, construction and O&M • Deployment of Hot line maintenance technique • Use of Emergency Restoration System

5. POWERGRID ; Grid Management • Implementation of Unified Load Despatch Centres in all the five regional grids (ULDC) at an estimated cost of Rs 2200 Crore • State-of-the-art ULDCs established in Northern, Southern, Western & Eastern regions • Manpower • Manning of RLDC by Senior personnel • Training of RLDC & SLDC personnel on regular basis • Implementation of availability based tariff • Adherence to Grid code • All these resulted into: • Significant improvement in System Parameters • Merit Order Operation, Leading to Overall Economy • Improved grid performance • Increased intra and inter-regional Power Exchange and Trading

6. Prevailing Environment Installed Capacity 1,43,311 MW Peak Power shortage : 13.9%, Energy Shortage : 9.3% Hydro – Thermal mix : 26:74 (desirable : 40:60) 23% of total Hydro potential of 1,50,000 MW is utilised today Private Sector Participation Generation : Opened up since 1991, Not many projects materialised Transmission : Opened up in 1998, Very few Projects on IPTC route materialised yet Electricity Act,2003 notified on 10.06.03 Regulator : CERC Orders on Bulk Generation / Transmission Tariff, ABT, Open Access

7. CORPORATE PLAN • Objectives • Providing matching transmission system for capacity addition in Central Sector/ Private Sector involving power sharing by multiple states • Create requisite System improvement Schemes to strengthen the regional grids. • Establishment/ operation of State-of-the-art ULDCs’ by the year 2005 for integrated operation of grid. • Setting up integrated National Grid by 2012 by creation of adequate Inter-regional/inter-country transfer capacity. • Diversify to Telecom and other promising area to create additional leverage. • Mobilising Adequate Financial Resources for the incremental investment as well as for completion of the past spillovers , while maintaining sound financial health of the company.

8. POWERGRID – An Overview • Incorporated on 23rd October, 1989 under the Companies Act, 1956, as wholly owned by Government of India. • Transmission assets from various Central/Central-State Joint Venture organizations viz. NTPC, NHPC, NEEPCO, NLC, THDC, etc. were transferred to POWERGRID. • Started commercial operation from 1992-93. • Designated as Navratna PSU in May’2008 • Notified as Central Transmission Utility in Dec’ 98. • First power utility & second company in the world to get certified with PAS 99:2006 integrating the requirements of ISO 9001:2000, ISO 14001:2004 and OHSAS 18001:1999. • Profit making since beginning.

9. Generation Capacity addition under central sector XI PLAN Ultra Mega Power projects (UMPP) at Sasan, Mudra and Krishnapatnam of 4000MW each already awarded. Source: Ministers on Power

10. CAPACITY ADDITION PROGRAMME (MW) -XI PLAN Source: Ministers on Power

11. FUTURE PERSPECTIVE • About 78,000 MW generation capacity addition planned during XI Plan ( 2007-08 to 2011-12) • POWERGRID to develop transmission system associated with central sector generation (about 40,000 MW) and Ultra Mega Power Projects. • Investment planned : Rs. 55,000 Crs in XI Plan. • Amount invested in FY 2007-08 Rs. 6615 Crores. • Target for FY 2008-09 Rs. 8040 Crores • Planned Transmission system addition ( XI Plan) : 60,000 ckt kms along with 65 new substations

12. POWER GRID CORPORATION OF INDIA LTD FINANCING OF PLAN OUTLAY COMPARATIVE CHART Rs in Crs

13. POWER GRID CORPORATION OF INDIA LTD FINANCING OF CAPITAL EXPENDITURE 2006-07 to 2008-09 Rs in Crs

14. BUDGET A budget is a plan expressed in quantitative, usually monetary term, covering a specific period of time, usually one year. Budget is systematic plan for utilization of manpower & material resources. In a business organization, a budget represents an estimate of future costs & revenue.

15. Budget Classes • Capital Budget : Directed towards proposed expenditures for new Projects & often require special financing. • Revenue Budget: Directed towards achieving short term operational goal of organization, normally forecasts expected income & expenditure and projected profit/loss for a given period.

16. Budget Characteristics • Prepared in advance & is derived from long term strategy of the organization. • Relates to future period for which objectives /goals have already been laid down • Expressed in quantitative form, physical or monetary units or both.

17. Advantages of Budget • Efficiency & Improvement in working of organization. • Motivating managers to achieve goals set for units • Benchmark for controlling on going operations • Helps in reducing wastage & losses by revealing them in time for corrective actions. • Evaluating the performance of managers

18. Power Grid Construction Budget Capital Budget : Directed towards proposed expenditures for new Projects & often require special financing CLASSIFIED INTO On Going Schemes New Schemes Telecom Completed schemes

19. On Going Schemes: Transmission lines/Grid strengthening schemes approved either by BOD or by MOP & presently under execution. • New Schemes: Schemes envisaged to be executed in near future and approval from competent authority is awaited. • Telecom : Separately indicated as it is a different business proposition • Completed schemes: Schemes already completed & commissioned but certain balance Capital expenditure is yet to incurred

20. All checks based on costComponents of cost COST DIRECT COST INDIRECT COST IEDC IDC

21. Finalization of Estimates • Budgeted estimate: Envisaged expenditure for forthcoming year. (Capital or Revenue) • Revised estimate: Envisaged expenditure for Current year. (Capital or Revenue) In Power grid Budgeting is a very detailed & exhaustive exercise, almost all the departments are involved. For Construction Budget CMG, CP, Engg., Telecom, JV ,Finance & other concerned departments work in close co-ordination to finalize Annual Plan

22. Estimation of Quantitative & financial targets • Initially, a New/Ongoing scheme is divided into two major activity namely different transmission lines & sub station to be constructed under the scheme. • Thereafter what is required to construct a line or substation is assessed. Example: For construction of T/L, supply & erection of towers, Conductors, Insulators, Earthwire etc. • Based on expected date of commissioning /Completion, targets are further split into month wise targets and bar charts for supply & erection is finalized to avoid slippage. • Physical targets are converted into monetary terms, Package wise summary sheet are prepared to assess package wise RE & BE • There after RE & BE of New/Ongoing scheme budget is finalized.

24. Revenue Budget Directed towards achieving short term operational goal of organization, normally forecasts expected income & expenditure and projected profit/loss for a given period. It involves estimation of all components of income and expenditure. Revenue Budget is estimation of profit and loss accounts of Power grid for current and coming financial year.

25. Major Components of Income • Transmission charges . • Telecom charges. • Consultancy. • STOA. • Reimbursement of RLDC’S. • Interest on Bonds, others . • Deferred income. • Surcharge. • Other miscellaneous.

26. Major Components of Expenditure • Employee cost • Repair and maintenance • Other administration charges • Provisions • Depreciation • Interest and finance charges • Tax • Other miscellaneous.

27. Preparation of IEBR Statement • Internal and extra budgetary resources indicate the various source of financing the construction activities of the corporation. • The various source of financing comprise of • Internal sources. • External commercial borrowings • Domestic borrowing • Budgetary support • Grant

32. BUDGETARY CONTROL • No system of planning can be successful without having an effective system of control . The exercise of control in the organization with the help of budgets is known as Budgetary Control . The process of budget control includes • Preparation of Various budgets. • Continuous comparison of actual performance with budgetary performance. • Revision of budgets in the light of changed circumstances.

33. Budgetary Control Characteristics • Should not be rigid. • Enough scope of flexibility to provide initiative and drive • Important tool for controlling cost & achieving the overall objectives

34. Budgetary Control in Power Grid • Corporate Monitoring group continuously review the physical progress of ongoing schemes • Corporate planning group is continuously keep track of all new schemes and company performance with respect to MOU • Finance department keep constant watch over financial performance of company with respect to capital & revenue budget targets.

35. Periodicity of review of Budget • Construction budget during initial months of financial year is reviewed on monthly basis by CMD & directors later on fortnightly basis & during march on weekly basis/daily basis. • Construction budget is also reviewed on quarterly basis by MOP in QPR meeting.

36. Periodicity of review of Budget • Revenue budget is reviewed on quarterly basis with quarterly results and expenditure is strictly controlled as per approved estimates. Any deviation to it, is with approval of competent authority . • Revenue expenditure is reviewed on monthly basis.

37. Major financial target of MOU reviewed on Quarterly Basis by MOP